My good friend and old buddy Rich Miller has an insightful piece in BBW that talks about the NEW MIX—Exports and Business Investment—of economic categories that could well replace the OLD MIX of consumption and housing in the US. This is hugely important because if the US can redesign its economy to focus on making, not just consuming, and exports, not just imports, it can grow faster than current estimates and cut both the budget deficit and unemployment rate a lot faster than most people in Washington now believe.
Obama has already said he wants to double US exports in five years—a very ambitious goal and one no other President has ever prescribed. To achieve that goal, the President will have to push three policies very hard: 1—Turn the US back into a making culture, not just a consuming culture. Innovation is key here and the billions in stimulus funds to promote green tech is a good first step. Bolstering tax incentives for innovation is critical as well.
2—An innovation society needs great universities and public schools that teach creativity, not rote memorization. This requires big money for top universities and a new curriculum for schools.
3— A global currency realignment, with China’s yuan rising against the dollar, is necessary to price US exports competitively. The Great Recession was driven, in part, by huge imbalances in trade between the US and China. To balance that out, China needs to move toward a more consumer-driven economy as the US shifts to exports. A higher yuan gives Chinese consumers more buying power for imports and lifts their standard of living.
Transforming the US into a “making” society that exports requires a consistent set of policies from Washington. It means rethinking the decline of manufacturing and making green tech products in the US.